ya know... even as we do like bashing our favorite evil empire...we wish to honor the longevity of Dagny's R.I.P. U.S.A. thread - with another...there are other R.I.P.'s also languishing in the wings - for copious~comments~criticisms...

thus, we start another hopefully interesting~informative~(divisive?) thread...we've kicked the PIIGS around a bit - so let's broaden our quasi-continental target?whither now go-est the E.U./euro... things do not bode well?

Four Horrible Choices Facing Europe In Just The Next Several DaysAmbrose Evans-Pritchard nails it in his latest Telegraph column:

The leaders of Germany and France have three bad choices as they decide whether to save EMU this week, or pretend to do so.

The choices: Fiscal union, an ECB multi-trillion bond buying bonanza, or the current state of perpetual crisis, with one failed bailout mechanism after another.

There is a fourth option of course: Give up hope, and end pull the project on the euro once and for all.

Of the above options, the ECB seems the most likely, and it obviously cranked into gear last week, bringing Italian 10-year yields from over 6% to around 5%. What's more, the ECB approach is politically lazy (and un-democratic), as it doesn't require more tough votes in bailout-hostile parliaments across the continent. Furthermore, with CDS rising in Germany (and France), the cat's out of the bag: Europe's core is a credit risk too if they're really to shoulder the burden of everyone else.

AEP is also probably right about this point:They have days or weeks to make up their minds, not months.

Indeed, with concerns finally breaking into France (will it lose its AAA? Ar its banks at risk?) endgame seems fairly close at hand. Doubt it will be a quiet week.

now please - let the games begin!

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Things are not what they appear to be: nor are they otherwise. --- Surangama Sutra “If we want everything to stay as it is, everything will have to change." --- Giuseppe Tomasi di Lamedusa

The truth is, no one knows what will happen, not even our learned friends on this forum. Ultimately, the question is about buying power, as in, "How many hours do I have to work to buy a kilo of rice, or a liter of gas, or a kw of electricity?". Speaking as one who is living comfortably within my earnings in CLP, the value of the dollar and the euro don´t affect me much right now. Once I am old enough to be eligible to receive payments from my dollar-based pension, which I expect to decline in value over, say, the next five years, I might be able to work a little less. Or not. I might end up like many people in the US...working well past the age we had hoped to stop. Will the dollar lose 20%, or 80%?

If you're not earning loads and have no doubts about sticking around here you might consider pulling your pension fund out of the US and paying the taxes (and maybe a 10% penalty?) up front now... Then your buying power is (more) protected. Of course having income in multiple currencies is probably a good hedge ordinarily. Just a thought...

eeuunikkeiexpat wrote:But when all fiat is ultimately connected to the world reserve currency, what is the use? Have you seen the article on what the Swiss might do (to CHF) if things become too unbalanced?

perhaps this article may elucidate about the rich swissie...and the surfeit of problems arising...i.e. “the franc is catastrophically overvalued” = 39 percent against the eurostay tuned - it's going to get real interesting in euro~land!

Probably we will have a Japanese future both for the Euro zone and US, slow growth, buy and hold as an investment strategy is a dead end etc. May be combined with somewhat more inflation in the US (whether these will show up in CPI numbers is another questions) and continued credit issues in the Euro zone

I wouldn't bet too much on the CLP either (or against the USD). Despite some wishful thinking to the contrary, Chile is not an island, and mean reversion is an extremely powerful force (although it has the nasty habit of taking longer than most market participants expect). Diversification is still a good strategy and I'm certainly prepared to sacrifice some return for that.

passport wrote:So can't the Swiss print more francs to devalue their currency?

They can and will to some extent. But the policy tools don't work very well and on top of that macroeconomic parameters are just too good, public debt below 40%, currenty account surplus of more than USD 100 billion, only exceeded by the much larger economies of China, Japan and Germany.

Any policy measure to weaken the CHF will either come back to haunt them or is already creating issues now (i.e. real estate bubble). So at the moment I guess short CHF against USD or EUR is probably not a bad idea.

The future of the EU and € depends largely on the generosity of the German people. The whole thing reminds me of a dysfunctional family where one member works 80 hours a week to support the others lying around watching TV.

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